English Bay Limited (EBL), an IFRS reporting company with a December 31 year end, wants to raise capital on the bond market. EBL had the securities lawyers write up a debenture bond issue for 15 years at a face value of $12,000,000 and a coupon rate of 3%. The bond issue was dated and ready to take to market on October 1, 2019 with semi-annual interest payments (October 1 & April 1).

The underwriters, monitoring the market interest rates, convinced EBL to wait and the bond was actually taken to market on April 1, 2020 at a yield rate of 4%. The Bank of Canada rate at the date of issue was 1.5%.

EBL applies a separate bond discount or premium account, as required.

(Hint: Apply a time line to plot the events, contemplate the entry descriptions and ensue accurate n before proceeding with detailed calculations.)

In presenting entries, round all calculations throughout this assignment to the nearest dollar (no cents).

Part I

Required: Prepare entries, with supporting calculations, at the following dates:

1. Date of bond issue, April 1, 2020
2. October 1, 2020.
3. December 31, 2020
4. April 1, 2021

Part II

On April 1, 2025, after the bond interest payment, EBL had excess cash and went to the open market and redeemed 30% of the bond issue when the market yield rate was 6%.

Required: Record the redemption entry; show supporting calculations.

Part III

EBL decided that it should report its financial instruments at fair value as of April 1, 2025 on the remaining balance, after redemption, of bonds and will employ a separate new balance sheet valuation account, Adjustment to fair value, if required, to identify any fair value adjustment to the carrying value of the bonds at that date. The Bank of Canada rate at this date was 2.5%.

Required

Prepare any entriey(ies) required as a result of adopting fair value; show supporting calculations.